The Awful Politics of the War Tax

Wars cost money, even if President Bush's wartime tax cuts encouraged us to believe otherwise. So House Appropriations Chairman David Obey (D-Wis.) has made a modest proposal: To fund any escalation in Afghanistan with a surtax that would hit the top five percent of tax payers only. In the abstract, I think Obey's plan represents an important point. Budgeting is the art of prioritizing, and when we agonize over non-discretionary spending while blithely passing big war budgets with a flick of congressional "Yea" votes, we shield ourselves from the costs of war, stacking the deck in favor of foreign adventures, and against necessary domestic spending.

But there's a reasonable concern with Obey's specific proposal.

The right way to tax a war is to impress on the electorate
the idea of shared sacrifice. So long as most Americans consider war
efforts something we export entirely to our armed services, the choice
to wage war feels something like a non-recourse loan for most voters. If it works out, America wins. If it doesn't work out, at least I didn't have to do anything. Enshrining the value that wars have a cost we should bear collectively is a good principle.

But that's not really the principle Obey is advancing. A surtax on the
top five percent of tax payers wouldn't be a shared sacrifice. It would
be the highest percentiles paying for a war effort fought mostly by the
lower percentiles, which is, it turns out, essentially what we have
already. A broader-based war tax would go further toward this idea of
"shared sacrifice." But in the aftermath of a recession, a broad-based
tax increase is almost certainly out of the question -- not merely
among conservatives, but among moderates and liberals who don't want to
burden the fragile job market.

So I'm with Mark Thoma.
A surtax might be palatable, but it's not a shared sacrifice. A general
tax would be a shared sacrifice, but it wouldn't be palatable -- among
the electorate or among White House economists who want to avoid
broad-based taxes until the economy is healthier. In any case, it
sounds like the war tax is dead, anyway.

Update: I misread the specifics of Obey's proposal, which would tax all Americans at a progressive, exempting those earning under $30,000. It would also give the president the prerogative to waive the tax until 2012 if the economy takes a while to pick up. All told, not a bad idea, and not nearly as limited as I imagined.

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Derek Thompson is a staff writer at The Atlantic, where he writes about economics, labor markets, and the media. He is the author of Hit Makers.